Professional Documents
Culture Documents
1.1.1
Political: ................................................................................. 2
1.1.2
Economical: ............................................................................. 2
1.1.3
Social: .................................................................................... 3
1.1.4
Technological: .......................................................................... 3
1.1.5
Environmental: ......................................................................... 3
1.1.6
Legal: .................................................................................... 4
3.1.1
3.1.2
3.2
3.2.1
3.2.2
3.3
3.3.1
3.3.2
3.4
3.4.1
3.4.2
3.4.3
In order to enforce compliance and energy conservation act, the government has
recently given its nod to fuel mileage standards and labelling for new cars.
General excise duty for automobiles has been hiked by 2% from 10% to 12% which
will increase prices of small cars, two wheelers, etc.
1.1.2 Economical:
Inflation always has a negative impact on the industry. The industry comes to a
standstill when there is an inflation in the market. The sales decrease because of
the rise in prices of the vehicles. The prices of the vehicles have to be increased to
meet the increase in price of the raw materials required for manufacturing.
Higher interest rates have a negative impact on the industry. Higher interest rates
means that it costs more for consumers to borrow money for auto loans. Therefore
the demand decreases and hence the sales decrease.
Inflation and high interest rates also dampens the economic growth.
Therefore to obtain high economic growth and to increase the sales the inflation
should be controlled and the interest rates should be kept low.
1.1.3 Social:
Rising per capita income, rising working population and middle class urbanization
have all contributed to the growth of this industry.
People are more inclined towards buying personal vehicles to maintain their status
quo.
People realize that during an emergency a personal vehicle will be more useful
rather than relying on public modes of transport.
1.1.4 Technological:
Spending on R&D in India has increased over the last few years.
Cost advantage India offers makes more players likely to scale up R&D outsourcing
to India
Role of IT is increasing in this industry. They are developing solutions for the
automobile industry.
1.1.5 Environmental:
Physical infrastructure such as roads and bridges affect the use of automobiles. If
there is good availability of roads or the roads are smoothen it will affect the use
of automobiles.
Technological solutions helps in integrating the supply chain, hence reduce losses
and increase profitability.
With the entry of global companies into the Indian market, advanced technologies,
both in product and production process have developed.
1.1.6 Legal:
Ensure a balanced transition to open trade at minimal risk to the Indian economy
and local industry
The company has a technical tie-up with Kawasaki Heavy Industries, Japan to produce a
range of two-wheelers in India. Since the tie-up, Bajaj Auto launched KB100, KB RTZ,
KB125, and 4S, 4S Champion, Boxer, Caliber, Caliber115, Wind125 and Kawasaki Bajaj
Eliminator. Recently, the company launched Ninja 250R and Ninja 650R.
Through the investments segment, the company invests in Bajaj Auto International
Holdings (BAIH), a 100% Netherlands based subsidiary, and PT Bajaj Indonesia which
assembles and markets Pulsars in Indonesia. Through BAIH, Bajaj Auto has a 47.18% equity
share in KTM Power Sports (KTM) in Austria, Europe's second largest sport motorcycle
manufacture.
Weaknesses
reputation
Labour dispute affecting production
Opportunities
Threats
product portfolio
Platina motorcycles. In addition, Bajaj Auto manufactures scooters under the brand,
Kristal.
Moreover, its adoption of a brand-centric strategy, focusing on the differentiation and
positioning of the Discover and Pulsar brands has reflected on the company's robust
volumes. The repositioning of its brands has helped the company cater to the segment
between executive and premium bikes and also the entry and executive bikes. Moreover,
through Discover and Pulsar, Bajaj Auto has successfully transited from the low profit
Commuter STD segment to higher profit segments including the Commuter DLX and Sports.
The three-wheelers segment manufactures goods carrier and passenger carrier threewheelers. Bajaj Auto manufactures a range of passenger carriers which include: 2-stroke
(2S), 4-stroke (4S), 4S compressed natural gas type, 4S liquefied petroleum gas type and
4S diesel type. Therefore, the company's extensive range of products and well established
brands covering the diverse spectrum of the automotive market enables it to cater to a
wide range of customers and price points that further strengthens its reach and market
position.
strikes such as these in the near future would have an adverse impact on the company's
overall production output and its revenues.
Thus, launching of new and innovative models of vehicles and technologies would allow
the company to strengthen its portfolio of two wheeler vehicles by attracting new
customers, while retaining its existing customers.
Hence, a consistent increase in the bank interest rates in India would negatively influence
the growth in Indian automobile sales which in turn would impact the company's vehicle
sales.
3.4.3 Extensive environmental regulations
The company is subjected to extensive governmental regulations regarding vehicle
emission levels, noise, safety and levels of pollutants generated by its production
facilities. These regulations are likely to become more stringent in the near future. The
emission norms that are in force for two-wheelers and three- wheelers are more stringent
than the Euro II norms. India implemented the Bharat Stage (BS) 2 norms throughout the
country in 2005 and BS 3 norms from October 2010, which are more stringent than the
previous norms. BS emissions standards regulate the output of air pollutants, such as
nitrogen oxides (NOx), carbon monoxide (CO), hydrocarbons (HC), particulate matter (PM),
soot, and, sulfur oxides (SOx), by motor vehicles and other equipment.
Hence, more stringent vehicle emission regulations in the future may lead to significant
compliance costs for Bajaj Auto, which may have an adverse impact on the profitability.
Market Share: The market share of Hero MotoCorp last year was 56% while that of
Bajaj Auto was 25.6%.
Volume Growth: Hero MotoCorp had a volume growth of 16.5% last year while
Bajaj Auto had a volume growth of 7.4%.
Operating Profit Margin: The operating profit margin of Bajaj Auto is 18% while
Hero MotoCorp has operating profit margin of 11-12%
Strategic Alliances: Hero has broken its partnership with Honda but it has teamed
up with the worlds largest privately owned engine developer, AVL of Austria, to
develop technology for its 100 cc and 110 cc models the Splender Range and the
Passion. It has also signed a technology sharing deal with US motorcycle firm Erik
Buell racing. On the other hand Bajaj Auto is counting on its five year alliance with
KTM of Austria to crack open new markets and produce higher end products.
Price Segments: KTM and Pulsar make Bajaj Auto a powerhouse in the 60000 plus
bike segment. But in the 45000-50000 price band, Hero dominates. Even in the
40000-45000 price range Hero reigns supreme.
Distribution Network: Over the years, Hero MotoCorp has built its distribution
network of 700 dealers and 3700 service centres. More than 2000 rural channel
partners work on the rural vertical through the har gaon har aangan program.
Over the past four years, its distribution network has grown nearly 2x compared to
peers. The distribution network is fairly spread across the rural and semi urban
areas. On the other hand Bajaj Auto has a distribution network of 485 dealers and
over 1600 authorized service centres. It has 171 exclusive dealers for the three
wheeler segment and has total 3750 rural outlets in rural areas.
Bajaj Auto acquired a 38% stake in Austrian bike maker KTM power sports and
introduced products from its range in the Indian market. The first product was the
Duke 125 cc.
Bajaj Auto has a 98.9% stake in PT Bajaj Indonesia. It is a subsidiary of Bajaj Auto.
It assembles and markets pulsars in Indonesia.